Re: Debtor Nation, another view

On 16 Oct 2005 12:20:19 -0700, "ruetheday@xxxxxxxxxx"
<ruetheday@xxxxxxxxxx> wrote:

>>>>I asserted in simple terms that borrowing alone will not assure the
>>>>scarcity of a fiat currency. I claim that taxes are a necessary
>>>>condition for that purpose. Now if you can show how a fiat currency
>>>>can retain value without taxes, please do so and explain how.
>>>>Otherwise it should be evident (even to you) that taxes are ultimately
>>>>what a fiat currency depends on to give it value on a continuing
>>>>basis.
>
>>>>For those unfamiliar with the subject, this is the basic tenet of the
>>>>chartalist theory of money, sometimes called the Knapp's "state theory
>>>>of money."
>
>>>All that is necessary for something to have value as money is that it
>>>is scarce and that other parties are willing to accept it as payment.
>
>>Exactly so. But what you have failed to explain is: what is required
>>to ensure that other parties are willing to accept it as payment?
>
>What is required is for that party to _believe_ that other parties will
>accept the money as payment.

Well that again begs the question. What will guarantee that other
parties _believe_ a government's fiat currency will be accepted by
others in payment?

>While the state accepting fiat money as
>payment for taxes certainly contributes to that, it is not, in and of
>itself, necessary and sufficient.

It is not a matter of the State _accepting_ but rather the State
_requiring_ its fiat currency in payment of taxes. That is a
_sufficient_ condition to guarantee that citizens will do whatever is
necessary to acquire that currency, and thereby ensures that it has
value among all who trade with tax payers, namely the entire private
sector. The need to acquire the State's currency translates into the
willingness to deliver goods and services to the State, which
automatically means the currency has value.
>
>>>Those other parties can be the government (as in the case of taxation)
>>>or they can be private individuals and firms willing to accept the
>>>money as payment for goods and services. There is nothing peculiar
>>>about taxation with regard to the value of money.
>
>>So I'll repeat the challenge. Show how a government's fiat currency
>>can retain value for long without taxes.
>
>Well, I have a twenty dollar bill that I'm staring at right now, and I
>notice the words, "This note is legal tender for all debts, public and
>private." imprinted on it. So, for one, the fact that federal law
>requires creditors to accept US currency for payment of private debts
>will create value in the fiat money.

Legal tender status is a weak incentive to acquire the State's
currency for the public at large. The number of people who become
involved in legal liability issues is a very small fraction of the
population. It just doesn't impinge on the daily lives of the vast
majority.

There is no sure way to determine whether legal tender status is a
sufficient condition because there is no precedent to look to, but it
is clearly a necessary condition.

However I can't imagine a viable system without taxes in which
government spending accounts for say 20% of national income. The
amount of the currency in circulation would rapidly grow to the point
of hyperinflation.

.

Relevant Pages

  • Re: Debtor Nation, another view
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    (sci.econ)
  • to exhaust claims
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  • Re: to exhaust claims
    ... The parties then agree that after the money has been paid, ... In the Polish legalese that would be "the payment ... Only an *acceptance* of the money on such terms will suffice to bar ...
    (alt.usage.english)
  • Re: to exhaust claims
    ... money to satisfy that other party's claims. ... The parties then agree that after the money has been paid, ... In the Polish legalese that would be "the payment ...
    (alt.usage.english)
  • Re: to exhaust claims
    ... money to satisfy that other party's claims. ... The parties then agree that after the money has been paid, ... In the Polish legalese that would be "the payment ...
    (alt.usage.english)